Anniversary Episode: Due Diligence & Asset Management Approach
On this episode of Next Level American Dream, Abigail and Sean are joined by Daryl Brooks and Kevin Hackbart. Daryl and Kevin are the founders of a multifamily investing and asset management company, Value Add Partners. In their interview, they walk Sean through their approach to due diligence and asset management.
Key Topics
What is the process of due diligence for a multifamily investment deal?
What is the purpose and benefits of having an asset manager?
Connect with Daryl Brooks & Kevin Hackbart:
Website: https://yourvap.net
LinkedIn: https://www.linkedin.com/company/value-add-partners/
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SUMMARY KEYWORDS
property, multifamily, unit, deal, due diligence, contract, money, Kevin, lease, construction, American Dream, walk, building, business, property manager, day, apartments, big, Daryl, family
SPEAKERS
Sean Thomson, Abigail Thomson, Kevin Hackbart, Daryl Brooks
Abigail Thomson 00:00
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean, discuss how you can take your American Dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. On this episode of Next Level American Dream, Sean interviews Daryl Brooks and Kevin Hackbart. From Your Value Add Partners, Daryl and Kevin are the founders of a Multifamily investing and asset management company and in their interview, they walk Sean through their approach to due diligence and asset management. If you're interested in learning more about multifamily investing, visit our website at www.thomsonmultifamilygroup.com
Sean Thomson 01:00
Hi, guys. Welcome to the Next Level American Dream Podcast. Thanks for being on the show. Thanks for having me. Sure. Great. So, we have Kevin and Daryl here. And they both have extensive experience in construction and multifamily, if you don't mind just sharing with the listeners to kind of how you got to where you are today.
Kevin Hackbart 01:21
Sure, I'm Kevin, I started when I was a fireman for 20 years. And while I was doing that we we only work 10 days a month. So, I got into single family real estate investment. So and then once I got into the investment side, I started doing the construction portion of it as well. And so that morphed into doing multifamily construction. And I got hooked up with a national property management company. So I've operated in about 3037 states nationwide, and went to a conference in about a year or so ago and decided that we were doing a lot of this work for other owners and we wanted to wanted to do it ourselves for ourselves. So we decided to start value add partners. And that's how the dream happened.
Sean Thomson 02:10
Yeah. And Daryl, how about you? How did you kind of get started?
Daryl Brooks 02:13
Yeah, so I started by age 13. My mom, my mom and dad, my dad was a truck driver, mom was a school bus driver. And they started buying some HUD houses. And they were at the time they were Believe it or not, they were buying off the fun was for like $500 thousand dollars. And they would go and we would just fix them up, you know, we would get taught me how to, you know, shingle and do all these different things. And that so razorgator High School and did a little bit of college for a while and say to join the Navy, when the Navy was in submarine service for a couple years there and then transferred out as a Navy Corpsman transferred out to a Naval Hospital in Oakland, California. And so when I got back to Michigan after I got out like four years in service, you know, started just doing you know, renovation stuff, startup renovation company and at work doing that stuff, home remodels, building, garages, decks, that kind of stuff. And then I got into the new construction side and I was running a company here, we had 300, rough carpenters and 27 or 27, trim carpenters, and we would rough and trim about 7 million square feet of buildings a year. So whatever it was, whether it was renovations of both hotels and condominiums or renovating apartments through low income housing, tax credit deals, building new apartments, houses, build out some commercial buildings, you know, whatever, pretty much seen just about everything on the construction side two there. So obviously 2006 happened and economy here in Michigan, probably when the tank. So the company kind of limped along for a few years. And in 2012, I started another framing company building company. And as Kevin said, We both been running these companies separately met last August, August 19 in an event, and you know, we're kind of drawn to each other because we're backgrounds but even though they're similar, they're quite different. And long story short, we're like, Hey, you know, we've been doing this stuff a lot of their people. And, you know, we've always just been on the, on the work side of it on the, you know, doing the construction is like the transactional type thing. You know, both of our businesses are that way it's transactional. So if we don't build or remodel or do whatever we're doing, then we don't make any money. And so we were looking at this at this event, and like, you know, we need to get in this passive side, and start getting on the ownership side of these things. So to start a value add, we've been building our team and, you know, working on different deals and stuff for the past year. And yeah, kind of takes us to where we are today.
Sean Thomson 04:44
Yeah, you guys been doing this for a long time. So tell us a little bit about what what is your company? What's your company's structure? Now? What do you guys What's your purpose, your direction? What are you primarily focused on your company today?
Daryl Brooks 04:56
So we look for distressed properties is our main thing and we handle the worst Everything. So whether it's you know, working with different investors or people that have maybe a deal they're looking at, we'll partner up with them, take a look at the DLC that makes sense does, you know move forward with through an LSI. And then into a contract for the site, do a site visit to do the due diligence, then we'll develop a business plan the construction budget for that particular property. And we handle it construction management, we bring all the guys in, like Kevin says, he operates in 37 different states, he's got crews, it'll travel. And so we can come in, we can handle all that. And then we work same time simultaneously, whether it's a third party property management, or whether it's our property management, we start working on the property management side while the repositioning is taking place. And then we can handle the asset management all the way through. So whether it's working as the syndicator of these particular deals, or whether it's working with, you know, whoever the managing member is on these deals, we basically handle everything on that side. So our main thing is we partner with people, we handle the work side, we're looking to partner with people that are bringing, you know, a balance sheet, or they're bringing, you know, money to the deal, whether it be through, you know, the LP side as a passive investor, or, you know, sometimes some of these deals are small enough, it's just everyone's GP in the deal. So, it really depends.
Sean Thomson 06:20
So if someone has a, someone has a heavy lift rehab, you guys, you guys kind of focus on that sort of thing, as opposed to, you know, a more stable property, you guys aren't afraid to come in and do that heavy lift because you have such a strong construction background and such a strong construction business in a large areas. Is that right?
Kevin Hackbart 06:40
That's correct. And so that's basically that's really our competitive advantage, Brian, because for some, for some, generally, people that think is a heavy lift for Daryl and I, it's not as heavy as you think. And so every lift, we were looking at 160 units in Mississippi, that was 100%, bacon, five units were burnt, five buildings were burnt down. And we were pretty much ripping everything out and putting back together, what was there that was a heavy lift, you know, people would walk away and run away from that deal. No problem. So, right. But yeah, so we we, we are not opposed to looking at a little bit more stabilized with minor lifts to it because guys, we how easy would that be? You know, just to be able to walk in and, and do that. So but but yeah, so that is our competitive advantage. So we can do anything from the major, major heavy lifts to just basic, you know, lipstick and functionality and property management, you know, fixing?
Sean Thomson 07:43
Yeah, I think I think most deals syndicators are looking for, you know, light, light value, add, you know, carpet paint and a few appliances is about as bad as deep as most people want to go Yeah, and then they try and stabilize it, you guys are in a unique, I would think segment of the business where being able to do five buildings and renovating the whole rest of the property. Having that advantage is I would think would be a big thing. So
Kevin Hackbart 08:08
well, it just opens the market up for more deals, really, because there's a lot of people like in syndication that won't, that won't go after certain deals, but there's a lot of money in there. Daryl's you know, big for, for himself. But I know he said it many times, you know, there's so much gold underneath that pile of rubble, that that people don't really pay attention to it. And so we we generally try to hit those because it's low hanging fruit for us, you know?
Sean Thomson 08:36
Yeah. And it's there is definitely there's more to those deals that more upside to those deals, if you don't mind or if you can, if you have the capacity to to put in that effort. And that energy and and can do those things. There's definitely there's definitely a better upside to it for sure. But most people are just afraid of they just you know, to run a project like that is it's pretty hairy and scary at the same you know, so I think most people run away from those but that's that's a great advantage you guys have?
Kevin Hackbart 09:01
Definitely
Daryl Brooks 09:02
Yeah, I was just gonna say, you know, on those tech deals like that sometimes lending so difficult to get in place, you know, lender because a lot of times when we're dealing with stuff, we love stuff that's like 50% occupied the last turn units faster. Generally, it's not just the property, it's also the property management, that's a problem. And it's not always the property management so much as you have a property manager, sometimes it's unsupported by the owner, and meaning that they're given the resources to be able to manage the property correctly. With you know, the the budget that they need to make that because those buildings, they the operating expenses are way off the hook, they might be 6070 75% because when you're putting band aids on everything stuff continually keeps breaking. And so yeah, when we come in, we look at that's one of the main things we look at when we're looking to turn these properties is how can we reduce the operating expenses in here because if you reduce your operating expense by $1 can actually It's an actual dollar in your pocket, as opposed to raising the rent by $1, you're only getting 50 cents or whatever, wherever you're operating it, you know, expenses. That's what you're getting what's left of that, you know, minus your debt service. So, you know, when you can reduce your operating expenses, especially like repairs and maintenance and stuff like that. Yeah, so some folks just there, you know, like you say, that it scares them, they walk into that and see something like that. And they're like, Oh, my God, you know, I remember my wife, her first house, we turn, she walked in there, and she was brand new to this stuff. And she was like, Are you kidding me? You're gonna watch, I'm like, trust me, honey, it's gonna look beautiful. And I'm done. So, you know, it was funny. You know, so when you see the look on those people's faces like that, you know, it's just like, you don't know, and you just don't know. And so, yeah, and that's, that's what, that's where we come in. And that's where we like to partner with people that maybe they have a deal like that in your backyard. They've been, you know, it's been sitting there for a while, and they're like, you know, I really take a look at this, but I don't know where to start. So that's the importance of partnering with people like us, or, you know, other people. So,
Sean Thomson 11:07
yeah, that's a secret, you know, I do the same thing. In my single family business, I don't have a strong construction background, like, I've never like constructing a cup or anything like that. But I've looked at a lot of properties. And I've done that, in my business to where I buy a house, I bought a house one time that I couldn't get people to go into it, to look at it. So, you know, they were just, they were just, it was so bad. You know, I ended up picking up for like, 1000 bucks, and we put it we put like 85 grand into it. So 435,000, you know, made, you know, a couple bucks on it. Sure. But it was two weeks from being destroyed by the city, it was condemned, you know, but it was a beautiful little Three, two brick house, you know, so if you can find the the diamonds in the rough like that, you know. And now there's a nice little family living in this beautiful home that's living out their American dream, right. So that's really the payoff for for for doing those heavy metals, heavy projects like that, you know, that's really well, I want to keep going down this path, almost. But I would like to talk to you guys about due diligence, if that's okay. I think that's a topic that's fascinating. To me, it's a little bit of a, I don't know, kind of behind the scenes topic that a lot of people are aware of all the details of it. So if you guys don't mind, maybe describe to me what you think of you know, what due diligence is and what you guys are looking for when your due diligence, and what you know, kind of what are some of the things that you're trying to pull out when you're doing due diligence. So let's start with, first of all, what is the due diligence process?
Daryl Brooks 12:27
Well, I think first of all, it's better saying what it isn't. It's not people posting videos out there or walking this property doing our due diligence, it's way more, it's way more than that. And so don't think that's what it is that that's not what it is at all. And we've been doing a series on Friday, kind of kind of exploring different phases. So you've got like, different phases of the due diligence. So you've got what I call, like, the pre due diligence, which is the stuff that you can find out about the property, before you actually ever go to visit it, you know, you can see what the taxes are, you can call the building department, you can find out if there's any outstanding violations against it, you can call the tax assessor to find out if I buy this property for x, what is the tax where the new tax is going to be? Because when you purchase this property, the tax rate is going to change what's on that performance? not correct, there's you can get hold of your insurance agent find out what's what's this going to cost for insurance purposes, you know, you can do some calling around and do some Google reviews, and Yelp reviews, see what the reviews what people are saying about this property. So you're not walking into this thing cold, you know, might look like something that's a gem. But you know, I mean, it's got a horrible reputation, you know, at all, you know, it all adds in what you're doing. And then you kind of got like the, you know, what I call like the preparing for the due diligence, and that's the things you need to take with you in order to be able to actually perform this. So if you don't have a strong construction background, you call it and you need to get a hold of like a referee and, you know, electrician, no plumber and stuff and have them meet you out there to walk the property or at least some of the units with you. So that you can get a professional opinion about what's going on. People always throw a number out like it's gonna be late left, it's like three to 5000 or it's kind of a moderate left seven to 10 or maybe it's heavy left at 15. Who knows, you know, to have somebody out there that has some hard numbers, you're literally destroying, you know, stuff against the wall, you got to do that. So some of their stuff you know, get a camera you know, don't use your cell phone, you can use a tablet, a guest that works for you. Sometimes a drone comes in handy the other available to you flashlight boots, in this kind of thing. Any masks having boot covers is another nice thing to put in pocket. Sometimes they have carpet in there, they don't want to transcend through their with your shoes on and stuff and teach them how to take your shoes on and off. And you know, basically have a checklist to go in there. And you know, you're going to have to get you know, a layout of the units and some measurements of things that you need, need to know what type of start putting some numbers together. And then we try to set up some meetings with people because when we go do our due diligence, we're not there for, you know, a day or half a day or whatever, whatever, you know, 234 days depending on the size of the property. So we try to get meeting set up with the building department, economic development, chamber commerce, tax assessor, police department, Fire Department, you know, all these folks that we try to get these meetings set up with before we go out there, so that we can, you know, make best use of our time, because you need to talk to all these people, then there's a physical actual inspection that we go to. So you want to make sure you get in every evening, you know, property managers, to deal with a property manager versus a seller, I've been, I've been on once before, like I walked one in Cleveland once and actually walking the property twice, one for one investor and one for the other one. And I went back the second time as assistant, I have to see every unit, first of all, and I told my sera units, I get in there, and you're like, Oh, we only had six people that allow us in the unit. When I look back the second time, I found out why they wouldn't let me use other units because they were destroyed, you know, fours are ripped out broken out, you know, plumbing was a mess, it was just a nightmare. So it's important to get into every unit, you know, you can't take people's word for your walk every unit. And that takes some time. And, you know, once you have your basic measurements down, you know the other units, you're looking for gross things that are out of line, you know, they're molded around corners or ceiling leaks, do you see discoloration in the ceiling from a unit above it, where the plumbing is leaking? If you see faucets dripping, or just things like that, those are the things you want to document because it helps you to develop a fair priced offer on this building. And yeah, at that point there, then we always try to make friends with the the property manager and the maintenance person if there's one on site. And a lot of times Kevin, I will take them out to lunch, we'll take them out to dinner. And we just want to, you know, kind of befriend them. Because you know, the more they kind of get to know you a little bit, the more they start to open up and they know where all the bodies are buried, they know where the problems are with these properties. So if you can develop that trust with them, they'll start spilling the beans. And that's how I'd like to do it without the broker there, whatever, just the brokers over there, you know, they're less likely to kind of open up a little bit. So that's why we try to take them out to lunch or dinner, we always ask them, you know, hey, what would you do? What would make this property really stand out? What would make it eat? What would make your job easier? You know, there's a lot of insight. You know, some people say, now we have new kitchens in this place, I can lease these things up faster, you can shake a stick, you know, and then other times, you know, you hear some real horror stories. It's kind of crazy. But yeah, so that's kind of it in a nutshell. I know, what do you want to add to it, Kevin?
Kevin Hackbart 17:39
Now, that's basically that's basically it, you know, it's just a matter of there's like he said, there's a pre due diligence, and then there's actual due diligence, you know, you get all the, all the numbers, all the rent rolls, all that stuff. But then once you're out there on site is, is really looking at all, you know, all the mechanicals all the other big majors that are going to cause the most problems, and being able to hit in every unit, you know, and, and really just, you know, taking the time out there to look at all this stuff, because the one thing that you forget to look at is the one thing that's probably wrong, and that's going to cost you the most amount of money. That's a fact.
Daryl Brooks 18:13
And then there's the other side of it too loose of paperwork side, you need to go and you need to review every lease, you need to compare it to the rent roll that's been provided, we rent a property there, and you got in there. And you know, there were 300 leases to look at, took two days to go through them all. But there were security deposits that were whited out on the lease. And but on the rent roll, it showed that there was a $300 security deposit. So it's like, well, what's right, what's wrong, you know, move in move out dates, if a person's month, the month, you know, things along those lines, you want to really go over that whole expense, you know, portion of the of the p&l and the balance sheet there, it can have some real clues. If you see on there that you know, Harry's plumbing is out that site 10 times a month or something you're paying 10 times a month, it's pretty good chance you got some sewer issues out there. And you might want to think about actually bringing somebody in to actually camera, the drains, because those are something that can get really expensive, you know, also kind of gets into digging in, even in the pre due diligence, when you're kind of picking apart, you know, the paperwork that they send you. And there's a saying, you know, buyers are liars and sellers are worse. So, you know, it's one of these issues where you really have to dig deep into that stuff. And they'll complain and they'll they'll carry on about it. But you know, you just need to do it. And the other thing you want to see is what I see what kind of contracts exist on the property. Is there a laundry contract is your garbage contract, landscaping cable, there's there's all kinds of third party vendors, they have contracts that don't necessarily go with the owner there with the property. And so when you buy that property, you're going to inherit that contract. And you need to know that because we've looked at properties where the guys getting absolutely hosed on a laundry deal. He's not getting his fair portion of it, and you're stuck with that contract or you get a cable contract, you know, that's poor. And you know, it can make a big difference. And if you've been at this any time at all, you know, if you can raise if you can add $10 a month to a unit in a decent area, like say, six and a half or seven cap when, what that $10 more a month does to the valuation of buildings, absolutely massive.
Sean Thomson 20:26
Right? Yeah, St. Likewise, if you take $10 away, because you've got a bad contract. Yeah. So I'm just gonna recap some of that stuff for you guys. So the pre due diligence is kind of what I'm doing today, we've underwritten this property, we've kind of taken a global, you know, a 30,000 foot view of the financials, we think we think we can make a run at the price that they're asking for it, I'm going to go walk the property, now, they're going to show me a couple of the best units that they have on the property, of course, and, and I'm going to kind of give you an assessment of the property for capex, that's, that's the best The reason I'm walking the property today, I might talk to the property manager a little bit, I will definitely talk to the broker. But I'm looking at my assumptions that I'm making in my capex estimates in my underwriting are those fairly accurate, based on what I'm looking at, you know, if I show up, and the roofs are terrible in the parking lots terrible in the pools empty and green, and then I walk the units, and they're just trashed. I know, I've got to adjust my capex estimate on my underwriting in order to make an offer, that's reasonable, and that's going to protect me when I actually go into do full due diligence, which is, like you said, walking every unit, you know, and walking, walking the entire property, bringing out the specialist getting all the inspections done. So and then, you know, like you said, the financial audit is a big deal as well, you want to check every everybody I was gonna ask you, if you guys do, you re qualify the existing tenants. And when you take over a property,
Daryl Brooks 21:51
well, one of the things you have, there's I mean, there's a lease in place. So when you take those over, or than if it's like a section eight, voucher, a lot of cities, if it's a section eight voucher, if the ownership of the apartment changes, then it kind of breaks the lease, and you have an opportunity to maybe reevaluate them. But when you're buying the property, you're kind of buying it as is. So leases are in place you're kind of stuck with, with the COVID stuff right now, you know, the eviction ban on non payment of rent, it's important people understand that you can't evict somebody for non payment of rent, it doesn't mean you can't evict them for other things that they're breaking a lease, you know, illegal or illicit activity going on there nuisance, you know, any other any other thing, you can still evict people, you just can't evict them for down payment. So yeah, you're kind of stuck with those leases. And, you know, it's always a good idea. Yeah, it's always a good idea to, you know, ask them if they want, you know, hey, you know, this is what the new units are gonna look like, you know, would you be interested in signing a new lease, you know, get one of these type of apartments, and there's a way we have of being actually able to do the unit with leaving the tenant, you know, in that unit, where they don't have to move, you know, to a different unit, because it's kind of a hassle if you're trying to get somebody in move, you know, from one, you know, one apartment to another, not just because of the move, but more because now they got to change all their paperwork, driver's license, got to contact all the creditors, you know, change of address stuff junk like that? Yeah.
Kevin Hackbart 23:22
Yes, yes, she would. And then you can, then you can compare it, you can compare it to what their existing history has been. And then that you can use to your advantage to say, you don't generally meet our normal requirements, but, you know, due to your history of what you've done with this property, we're looking at upgrading and moving that. So, you know, everybody has a bad day, you know, but but yes, you do re qualify them.
Sean Thomson 23:52
Yeah, that's one of the things I like is because you want to find out a lot of times the existing property management, one of the issues they're doing is they're accepting tenants that may not fully qualify for what you're going to be doing with the property. And so to know kind of who's in those places, you know, when you're when you're trying to make these upside improvements, and who's going to make it through that process is important. So you know, re qualifying the doing the background check the credit checks, you know, that kind of basic stuff. On the tenants, I think the existing tenants I think gives you an a picture of where you're going to be headed or who's going to be maybe not make it through the cut, right, in terms of upgrading upgrading units and things like that. Well, let's talk about so that's, that's a lot of information. I hope everybody kind of caught that. I tried to recap a couple points there. But that was a ton of information that just go through. So you guys are looking at just the construction, the construction issues that you're going to run into, you're looking at any sort of the financials that are going to be quirky in their books, existing books, and then what the real real picture looks like. Let's talk about some of the I wanted to add any simply any service contracts that are in Place, you definitely want to check on those service contracts, such as the washer and dryer service contracts, some people have purchased properties where they're on the hook for, you know, five years and they didn't even know it. So and they're grandfathered in to when the property sells. So you definitely want to make sure you look at all service contracts that are in place as well. So verify the verify the information given to you by the existing ownership with the company that's providing the service to make certain that what the ownership understands to be the case is what the service provider also understands to be the case, right?
Kevin Hackbart 25:35
You definitely want that because you'll pigeonhole yourself into having a contract that you're not making any money on. So
Sean Thomson 25:42
yeah, so if you do have those cable contracts, laundry, or I guess they're called called clothing care contracts. Now, those different things, if you have those things in place, you want to definitely get those get contact information, contact those providers and make sure that what you're seeing is what what they expect to have happen as well. Definitely. Let's talk about some of the mistakes the common mistakes people are making as they go through this. Not the maybe not the front part, but doing the due diligence part, what is what are some mistakes that you see people come to you guys, I guess, or that you've noticed people overlooking and ended up costing them, you know, down the road.
Kevin Hackbart 26:19
Most of the time, most of the time, the things that I've seen are, are people under estimating their rehab budget, not having any contingency in place for unforeseen. I mean, when you even when you look in every single unit, you can open up walls, you can't you can't really do too deep of a dive you want to you want to try but I definitely think that there's that was a big, you know, not having a contingency amount in place, whether it's 5% 10% contingency of the total budget just for any unforeseen. And then the other thing that I've seen is not taking the extra, not taking the time, or not wanting to incur the cost of like having a plumber come out and snake the drains to make sure that it's that they're clean and functional. And there's no issues or problems that you have to replace, you know, getting the right, you know, called MEPs, mechanical, electrical and plumbing getting the right people out there to make sure that everything is good and functioning correctly. Generally, that incurs a cost. And people don't generally want to pay that cost. Because if tenants are living in there, obviously it's working, or their tenants wouldn't be in there. So they just kind of move on to the next deal. So those are two of the bigger things that I've seen that, that, you know, Daryl probably can elaborate a little bit more on a couple things. But those are the main things that I'd see that cause the most dollars and cents damage to the budget.
Sean Thomson 27:47
So people have come to you and said, Hey, this is my this is my rehab budget. And then when you go to actually start construction on the property or the project, you're like, wait a minute, your rehab budget to be here, we've got these other, we've got these issues. And then the other case could be if you're if you're trying to squeeze that rehab budget too much. And you come in and say, Hey, we're over budget. The other thing that you just you just have no room, like you said, even a contingency you have no room if there's anything that went wrong, if there's a wiring issue, if there's a plumbing issue, some of those things you can't see, if you don't have a contingency In the financials for that, then, you know, where do you go right? Where does that money come from if you didn't plug it in there, so it can be expensive.
Kevin Hackbart 28:28
Exactly. And then the other thing that I've that we've seen a lot is especially transitioning from single family to multifamily. You know, the single family contractors, generally are different than the multifamily contractors. So, you know, single family you're getting, you know, price per square foot in single family is completely different than multifamily. in multifamily. There, it's a combination of not only getting it for respectful price and a below average or average price, but being able to complete it timely, and have the capacity to actually complete it. You know, using a single family handyman on multifamily is not necessarily the way to go. Actually, it's not the way to go. You will lose your ass on doing that. Because those guys just don't have the capability or the experience or the availability to be able to knock out 150 unit or even a 50 unit deal. You know, you're going to spend twice as much on time, which is going to reduce your operating income, and you're gonna probably end up spending twice as much money as opposed to just paying more of a commercial retail price to getting it done. So they're on I've always said we're not the cheapest, but everybody we have we've vetted and we've used nationwide so we know that they're going to get the job done from start to finish and that is the most important thing. And we our prices reflect, not like I said, are not the cheapest, but they reflect the fact that they are competitive pricing, that gets us to the finish line. And that's what you need. Because if you have a 300 unit, or 150, or a 50 unit property, that's three quarters of the way done, it's going to show you know, so and the quality is going to show. So definitely make sure that your contractors or your subs are, are familiar with multifamily.
Sean Thomson 30:31
That's a matter of scale, right. So the guy who's used to coming in and doing a one house single house project, rehab, he's just not really equipped with staff, or just understanding on how to do six units at a time, you know, every, every two weeks getting these things knocked out, or whatever it takes, you know, and then moving on to a new building. So the scale of it is probably just not something that a single family contractor would be prepared for having the staff and just the equipment and the knowledge and being able to just do all the scale at a larger project. Is that what you're saying?
Kevin Hackbart 31:07
I am, that's exactly what Yeah, okay.
Daryl Brooks 31:10
Well, there are other areas where people really fail on is that, you know, not having a good business plan not having a good construction or renovation, or, you know, repositioning plan, whatever you want to call it. So in other words, they go in, they've been to some seminar and I tell them, you got to do this, this and this. So they go in there and they go, okay, and I do this, this and this, well, remarketing might not support that might not be something that you know, you can do, you know, as far as that goes, you might not be able to hard surface, you know, countertops, and you might not get the money back, or you might just be overdoing it, you know, reciting the whole bill. And, I mean, just all kinds of crazy stuff, you can look, you can look at, it gets back to our construction budget, because you can put too much money into these units too, you know, that's another problem people sometimes make is they put too much money into them, and it just takes too long to get it back. So very business plan, knowing what you know, knowing what the area is going to require, in order to attract the best tenants is what you're looking for. And so you definitely want to do, you are here, you're going to be better than everybody else's, but not by, you know, hundred feet can be bigger, you know, 1010 feet better, whatever, you know, just want to be something that's going to, you know, set you apart from cleaning functional. Yep.
Sean Thomson 32:29
And I think another issue is velocity of work. Right? So how fast can I get this property remodeled? How many units can I do every day? or whatever? You know, how fast can I get through this project? And you have to sort of scale that out, right, your construction company is only going to be able to do these projects at a certain pace. And if you're, if you're expected to do 150 unit remodel in a month and a half for you know, that's just not there's no way that's going to happen. And if your financials are anticipating that then you're you're completely, you know, in the weeds already. I think part of your like you're saying part of your business plan has to also include, you know, how rapidly can we kind of get these turned over, you know, how, you know, how, how does that gonna work? Was that gonna look like what's the timelines and you know, so that's, that's a good point. And that you want to make sure your plan includes, you know, the timelines and things as well, too. So that's, I think that's a big issue.
Daryl Brooks 33:24
And you got to work with the property manager, because you come into a property See, it's 85% occupied on 100 units, you got 15 down, you can work on where you can get in blown out well as other 85 units are going to take a longer period of time to reposition. So again, during the due diligence, that's one of the things you want to be looking at is how many people are month to month, how many people you know, how many leases are going to have expired in the next 30 6090 days. So you can build that into your plan. Because you can choose not to renew the lease, if the person doesn't want to upgrade to the new apartment, they don't want to pay the increased rate and you just don't renew the lease, and then they move out, you're able to go ahead and you know, get that unit into the thing. So like Kevin was saying, and you were saying you need to need a crew to come come in, blow stuff out like the bacons real quick. But you also need to have a plan on how you're going to turn these humans so you to turn them with your maintenance people or you turn them with a turn contractor, or you turn them with, you know, the guy who did the you know, original stuff, and it gets gets into the planning and you have to have a plan of how you're going to get all these units turned over what period of time and you know, occupancy slows that down. There's a way to do it. And like I said, we've got a way we can do it where the people they don't have to actually physically change apartments. They got to move out a little bit but it's not easy a long time three days. Four days, right?
Sean Thomson 34:47
Yeah. Well, that's good guy says what else do people kind of be sure to address in their in their due diligence? Is there anything is there like any last thoughts on that we didn't cover yet.
Daryl Brooks 34:58
Well, I think at the end Gotta keep all the information once you get back from your walk and everything, and you've done your heavy due diligence, and, you know, you got to put, you got to put the whole puzzle together at that point and find out if that offer you made in your elbow is sillage a legitimate offer, because, you know, they probably call retreating. And brokers hated, everybody hates it, but it's a thing we had to deal with looked at a property in February up in Illinois, snow on the ground, stuff like that, we went back to walk it again, in like, March, May, I think, was me. And well, the concrete was total garbage, you know, and so something we weren't able to see. So that was something new that we, you know, didn't see from pictures, wherever else how bad to concrete and porches and that were broken up. So we had to add that back into our budget, and had to go back to the owner and say, Look, you know, this is what it's going to cost us. We, you know, we're fair people, we weren't looking to try to get him to cover everything. But fortunately for him, he split the cost with us. And so you know, there you have to take that information. Once you've done all this, you got to take it, you got to put it together into a package and find out if that Li where you're, you know, for you've under contract or if you're under contract, you know, if it's something that needs to be adjusted there because of something you discovered during your your due diligence.
Sean Thomson 36:17
Yeah, it fits within your business plan that you that you know, you can execute that business plan. And everything that you everything you put in the business plan is is not as we want to make sure that you didn't miss anything, I guess is what you're saying. So it's good. Well, the theme of the podcast guys is a universe already. But next little American Dream. So I always like to ask everybody, both of you guys are clearly kind of living out your American Dream. It sounds like what do you what do you guys sort of define your American Dream as? And then maybe if you can share a couple things, if you have them, that you think you do to make your American Dream to the next level? If you don't mind?
Kevin Hackbart 36:59
My definition of the American Dream? Is that correct?
Sean Thomson 37:05
What is the American Dream for you? And and what is it that you're doing with your American Dream, and then if you have maybe a couple suggestions for people that you do, maybe you read books, or I don't know, what it is that that kind of helps you level up your you're working towards your American dream?
Kevin Hackbart 37:19
Yeah, for me, the American Dream is being able to not not have to worry, I was a fireman for you know, 20 years and and now, now I own my own business with Daryl. And so you know, there is, and with COVID. And everything happening, there's that that sense of security that you get from changing from an eight to five, Monday through Friday, having that security to starting your own business and making sure that income is coming in, my goal is to be able to make enough money to where I don't have to worry, and my kids never I have two daughters, and they never have to worry, and they're able to dream as big as they want to. And money will not actually hold them back. So they'll be able to have our, our job, Darrell and I His job is to make this a legacy for our families. And so we're our hopes are is that our kids are going to eventually get into to doing what we're doing now. And if they want to do something else, that's great, but they'll always have this to fall back on as a as a lifelong, you know, nest egg for them to learn and understand. So, for me, having that availability, I don't want to be rich, I just want to be able to live the life that I want to be able to live and have that sense of security to where I never have to worry anymore, even when COVID comes around, or the next thing or the next election issue that comes up, you know, I never want to have to worry about that. You know, and for me, some of the things that I do, because there are and Daryl can attest to this. We've been doing this for a year, you know, and there are days that are worse than others. And and there are times that were you know, not necessarily for me, not for me, I know not for Daryl, there's no give up, but there's like, Man, this sucks, you know, like it's not things are just not working things are not going the way that they split they're supposed to do. You know, you know, Dyson was one of those guys that said that if I it took me 444 thousand 298 times to come up with the Dyson vacuum and if I quit at 4287 that I wouldn't be worth $4 billion, you know, so you'll you know, just keep on, you know, keep on pushing, keep on living the dream. So one of the things that I do is I don't let you know, negative blows, you know, keep me down. You know, I always look for the positive and you know, you know, kind of put put it out to the universe and hopefully that everything is gonna, you know, go the direction that we want and you know, I have a vision board. I have things that I want and things that I need. And but you know, we try to, you know better ourselves with going on podcasts, listening to podcasts, reading books and things like that. But we are definitely living our American Dream we've, and I've, and I've said this before, Daryl and I love what we do, like we really enjoy real estate, we really enjoy meeting new people partnering with new people, and traveling to these cities and meeting different folks. And, and so we really enjoyed that. So we really want to, you really want to take what you're doing and really, you know, give 110% you know, you know, I think who was it there? Oh, somebody said, You know, I spend 80% of the time, but 80% of the time on something that makes me 20% of my money, you know, you need to, you know, really get involved with this. And like I said, we love it. And, and so so yeah, so what we're doing now is our American is our American dream. It's the it's the only it's the one and I say it's the way to it's the lottery ticket that I have a say so and, you know, this is my lottery ticket. And I'm able to dictate the direction that that that I'm going to win the lottery, you know, so that's to me what real estate is. And that's the direction that we that we both want to go.
Sean Thomson 41:25
Well that's good, yeah. How about you, Daryl?
Daryl Brooks 41:29
Well, first of all, America's the greatest country out there, you know, if you haven't been out of this country, and I'm not talking like the, you know, England, or France, or Italy or Spain, stuff like that, if you haven't been to like a third world country, central South America, you really can't appreciate what you have you I tell people all the time, if you were born in America, one lottery already. No, this is definitely still weighing opportunity you can do and be whoever, whatever you want to be, if you're willing to get the education and put in the work, you know, and that's the part that people miss a lot is, you know, it's not, people aren't gonna hand this to you, you know, you got to go wrestle it like, like a cow Wrangler, man, sometimes you got to go steer some nasty barns. And sometimes, you know, you got to lower calf, but, you know, it's tough, it's, it's not something easy. And it's, like Kevin was saying, you know, there's gays, man, you get punched in the gut. And it's, it should be very deflating. And that's what's great about having a great partner, like I have with Kevin, you know, if one of us is kind of like, you know, whatever, kind of licking our wounds that day, your guys like, you know, shut up and suck it up, and let's go, you know, whatever we don't, we don't find each other much slack when it comes to that we don't surround ourselves with, you know, who you surround yourself with makes a big difference. And, you know, you gotta surround yourself with positive people, there's tons of people out there that, you know, will tell you how, you know, tell you a million ways that you can't do this, you know, and there's so many different examples of how persistence pays off. And that's just it, you know, you have to work at this every single day. And Kevin says, we love what we do. So it's not something that you know, I mean, it's work. But you know, since you love what you do, it doesn't feel that way. We're always, you know, whether it's looking at deals or, you know, meeting new people, or visiting new cities and seeing what's going on, they're looking into apartments, that I mean, when we go in there, I mean, it's like, you know, the brains going a million miles an hour about how we can do this, how we can do that, what do we got to do here, you know, we're already just, you know, analyzing everything as we go through it. And, you know, I think we all do this for the same reason, you know, people say, Oh, I'm not doing this for the money. Well, that's Bs, for money. You know, I mean, that's, that's part of the thing. I think when you dig a little deeper on it, you understand what it is, and cedar, you know, you're doing it for your family, you know, if you have wife's kids, you know, whatever the situation might be grandkids, or whatever. You're doing it for that, because I just had a conversation with my oldest daughter the other day, and I said, you know, the education systems designed to make us model citizens to fit in a little peg, and stay there and follow the rules and get a job and good productive member of society. And that's all fine and well. But at some point in every family's life, the families that have excelled in this country, somebody along the way has decided to take a risk and decided to step outside that box inside and take on that challenge. And for most people, they didn't happen the first time. You know, there are too many guys out there. So yeah, I had this great idea in May I became a multi millionaire, you know, no, most. There's a process of, you know, setbacks and things like that. So you have to be persistent in that. But I think we all do it for the same reason. And it's our families. We want to be able to provide something for them that maybe takes this family to the next level. And what I love to see is how how our kids can take and parlay that that we build on And take it to something even grander than what we were thinking, you know, because the hardest work is getting it off the ground, you know, and keeping that ball rolling. You know, I tell Kevin, the algae, we use it, you know, we're pushing the stone up this mountain, you know, we get to the mountaintop, like right now, when we start pushing it, I can see that I know where I'm going, I know how to get there. But we still got this big stone. Once we get over the top, you know, it's like, that's where a lot of people quit. They're like, Oh, man, I need it. Well, for us, I like to short Valley and we're pushing the stone up the next mountain. Yep. And we just want to get it on up there onto the next deal. Not that we, you know, we've been as strong as we start. But you know, it's a situation where you gotta have a clear vision and some plans and some goals to have that direction. Don't be afraid to really have some crazy, outlandish, just, I mean, you know, I look at stuff like Elon Musk, and you know, some of these guys some of these ideas. I mean, Jeff Bezos is a prime example, when Amazon sort of people said, What the heck is this guy doing, he's losing money every day, you know, now, now look where he's at. So don't be afraid to dream big dreams and try to think outside the box, try to, you know, try to find those ways that you can separate yourself in this multifamily world, because it's a small world out there. It's not as big as people think. And the Internet has made it much smaller through podcasts like this, and just, you know, different things like that. But I guess the other thing I love the most about what we do, and I love what we do is just the people you meet along the way, it's so interesting to see how some of these people have made money out some of these people where they come from the struggles that they've had, it's a joy when you're talking to like an owner of a permanent property. This has been your baby for 30 years, it's fed their family for 30 years, it's very special to them. And it's just amazing. I just love hearing people's stories about about, you know, how they got, where they're getting, what they're doing, and where they're going and stuff like that. I love to see people succeed, or whatever it is, I love it. When I see somebody, you know, somebody kicks down a deal. I'm like, heck, yeah, man, I'm clapping for him, because somebody else can do it, I can do it, you know, we need more that encourage one another? Yeah, it's kind of a competition, you know, some of the areas, it's a lot of competition, people are fighting over the same properties and stuff. But you know, there's a ton of properties out there to do. So, you know, we like to meet as many people as we can, and find out how we can work together to help each other crush those goals that we all have, and just build something bigger than ourselves.
Sean Thomson 47:36
Yeah, that's good. I think so you got I don't know if you guys know my story. But my daughter works with me now too. So she's still going to college. She's in her last year of college. She's studying finance with a specialization in real estate. And she has a minor minor marketing. So she's kind of tailor made for this business. But she's, she's, she's my partner in the multifamily business that we have now. And my wife also works in the business. So I understand your family's legacy concept there. That's my whole family's in this business. And, you know, the hope is that you build something for your children that they can then take to the next level, right? So if I can get it here, and they can get it here, that's even better. Right? I get that quite a bit. Yeah. And I that's definitely not where I'm at as well. Guys, I really appreciate you coming on the show and sharing some of your experiences and knowledge. You know, you can tell you guys have a strong construction background in what you do. And I really think you did. Well, I just love to see you guys talk. I can tell you, you're specializing in construction. But yeah, we're very transparent.
Daryl Brooks 48:40
What you see is what you get we all you know, we're not putting up to be a pretenders, you know, so this is well, though. That's good. So it's good.
Sean Thomson 48:48
Authenticity is important. Yes, sir. I was also gonna say, you know, one of my one of my things in my life is every day, you know, I tell myself every day you got to show up every day, the men that's what most of you guys mentioned that that, you know, you get beat up a little bit, but you just got to show up every day, keep pushing, keep pushing. So that's it. You guys say that makes me feel like I'm in the right path, right?
Kevin Hackbart 49:13
Maybe I could talk them into a finance with real estate because some of that stuff is tedious. I could have my daughter just handle it. That would be awesome.
Sean Thomson 49:21
So Well, you know what happened was, I'll tell you if you guys have kind of but I'll tell you. So what happened was my daughter went to school I you know, I talked about going to college and all those sorts of things. And she went into finance. And then she said, she came to me one day and said, Hey, I want to I want to travel between she was thinking about going to law school after after this time period. And she said, I want to travel and I said Baby, you're gonna you're gonna need to figure out how to pay for that. Because I'm not I'm not paying for it, you know? Right? And she said that she said, Well, that's what I'm talking to you. I want to I want to learn some of what you do, you know, and at that time, I was in the single family game. And so we started talking about it and I had been wanting to transition to multifamily. So I so wanted to Join me, and we'll build it together, you know. So that's that's kind of how it happened. So there is time for your daughter's to kind of come around. And she wasn't interested my business at all until she got into college and started to see what was going on in the real world. You know, I still ask her every time I see her, you know, have they taught you how to make money yet? She's like, No, you know, so luckily, she asked me to teach her how to make money that at school, they teach her the technical issues, you know, technical stuff, and so it's, which I you know, I can't teach her those things, but I can teach you how to make money. So that's, she's got she's got the best of both worlds. Absolutely. So yeah, there's still hope. There's still hope for your 12 and 13 year olds. That's awesome. I'm ready. Yeah. Well, thanks, guys. I want to have you back on and we'll talk about asset management, some construction stuff, if you guys have time sometime in the future, you know, and we'll keep this conversation going down the road, if it does okay with you. Absolutely.
Kevin Hackbart 50:52
Absolutely. And and you can get a hold of us, anybody that's
Sean Thomson 50:56
watching can get a hold of us, you know, right. Yeah. Where can the people find you guys?
Kevin Hackbart 51:00
So our website is www.yourvap.net. It's Value Ad Partners, Inc. It has our phone numbers and email addresses on there. And we're also on Facebook, I don't know if we're on Instagram, that's kind of out of my paygrade. Yep, www.yourvap.net and you'll be able to find everything about us and, and we'll be updating that that website with our stuff that as we progress, so yeah, anything anybody has any questions? Or if they just want to have us look at some of their deals and just kind of give us you know, give us have us give them our two cents. We'll be more than happy to do any of that stuff.
Sean Thomson 51:44
Yeah, I'm going to be contacting you guys. I've got a couple properties that I've been passing on just because the list was a little bit too heavy. So I might send it to you guys.
Kevin Hackbart 51:53
I'm ready. Let's take a look at the Texas it's on then. I got exactly your guys here. We cannot that outlet.
Sean Thomson 52:01
yeah. Well, Daryl, Kevin, I really appreciate it's great to talk to you guys. I'm really happy we got this time. It's great to get to know you a little bit. And hopefully hopefully some people got some information out of this and we'll get you back on the show to talk more about other stuff. Okay?
Kevin Hackbart 52:16
Thank you so very much we really appreciate it. Good luck today on your walk.
Sean Thomson 52:20
Yeah. Thanks a lot. I pretty much see you guys say thank you guys.
Abigail Thomson 52:27
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com. Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.